When you first start a business; one of the key things to your success is to know your tax
obligations. You should not only know about income tax rules, but also about payroll tax rules.
The following are five IRS tax tips that can help you get your business off to a perfect start.
1. Business Structure. The type of business you choose will determine which tax forms you will
file. An early choice you need to make is to decide on the type of structure for your business.
The most common types are sole proprietor, partnership and corporation.
2. Business Taxes. In most cases, the types of tax your business pays depends on the type of
business structure you set up. There are four general types of business taxes. They are
income tax, self-employment tax, employment tax and excise tax. You may need to
make estimated tax payments.
3. Employer Identification Number. You may need to get an EIN for federal tax purposes.
Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need
one, you can apply for it online.
4. Accounting Method. It’s a set of rules that you use to determine when to report income
and expenses. The two that are most common are the cash and accrual methods. Under the
cash method, you normally report income and deduct expenses in the year that you receive
or pay them. Under the accrual method, you generally report income and deduct expenses
in the year that you earn or incur them.
5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses
and tax-exempt organizations pay for health care coverage they offer their employees. A
small employer is eligible for the credit if it has fewer than 25 employees who work full-time,
or a combination of full-time and part-time. The maximum credit is 50 percent of premiums
paid for small business employers and 35 percent of premiums paid for small tax-exempt
employers, such as charities.
The employer shared responsibility provisions of the Affordable Care Act affect employers
employing at least a certain number of employees (generally 50 full-time employees or a
combination of full-time and part-time employees). These employers’ are called applicable
large employers. ALEs must either offer minimum essential coverage that is “affordable” and
that provides “minimum value” to their full-time employees (and their dependents), or
potentially make an employer shared responsibility payment to the IRS. The vast majority of
employers will fall below the ALE threshold number of employees and, therefore, will not be
subject to the employer shared responsibility provisions.
Employers also have information reporting responsibilities regarding minimum essential
coverage they offer or provide to their fulltime employees. Employers must send reports to
employees and to the IRS on new forms the IRS created for this purpose. You can find all the
tax basics of starting a business at IRS.gov
Contact us here at Bookkeeping Concepts at 770-935-8200 for any of your business tax needs.